Southwest Adding Flights to Take Advantage of AirTran Purchase

Nov. 14 (Bloomberg) -- Southwest Airlines Co. is adding
flights from Houston Hobby airport and Chicago Midway while its
AirTran unit will begin service to Puerto Rico and Mexico as the
carriers shuffle planes after their combination in May.

AirTran’s changes include domestic flights from Baltimore-Washington International to New Orleans, Los Angeles, San
Francisco and Seattle, and service from Denver to New York
LaGuardia and the Ohio cities of Dayton and Akron-Canton,
Southwest said yesterday in a statement.

Southwest is changing AirTran’s network to create more
point-to-point flights to bigger cities and reduce reliance on
less-profitable passengers who make connections. The AirTran
unit has announced plans to drop service to 10 of the 71 cities
it served before being bought by Southwest, and these new
flights are being added in part by repositioning those jets.

“The demand is there, the fares are high, the financials
on the routes look good,” Bob Jordan, president of the AirTran
unit, said yesterday on a conference call with reporters. “In
today’s economy, we wouldn’t be adding the routes if the routes
didn’t make really strong financial sense.”

AirTran’s Puerto Rico flight will travel from Ft.
Lauderdale, Florida, to San Juan. New service to Mexico, which
needs government approval, includes San Antonio to Cancun and
Mexico City. More international flights are coming, Jordan said,
without elaborating.

Houston Hobby Flights

Southwest’s new flights from Houston Hobby travel to
Raleigh-Durham, Kansas City and Seattle. The Chicago Midway
flight will go to Oklahoma City.

Southwest and AirTran must keep flying separately until the
Federal Aviation Administration grants them a joint operating
certificate in the first quarter of 2012. The carriers will
begin codesharing and blending networks in mid-2012, Jordan
said.

These changes build on a Nov. 11 announcement by AirTran
that it will cease flying to five airports next year including
Miami and Washington Dulles, because of rising fuel costs and
sluggish demand. AirTran had previously started pruning its
network to drop smaller unprofitable cities such as Asheville,
North Carolina, before the Southwest purchase was completed.

Passengers who fly nonstop are more profitable than those
who connect, and changes to AirTran’s network including its
Atlanta hub may generate $750 million to $1 billion in new
annual revenue for Southwest, Chief Executive Officer Gary Kelly
said in an October interview. Those projections are already
included in the airline’s $400 million target for so-called
merger synergies, he said.

Profitability

During the first quarter of this year, the last full period
before the $1 billion AirTran deal was finished in May, Dallas-based Southwest reaped 11.99 cents for each passenger flown a
mile, compared with 10.43 cents for AirTran, according to a
regulatory filing.

About 75 percent of Southwest passengers fly nonstop, while
only 35 percent flew that way on AirTran, according to data
provided by Southwest.

Buying AirTran gave Southwest access to Atlanta, the
biggest U.S. city it didn’t already serve, and a second fleet
type with AirTran’s Boeing Co. 717 jets. It also eliminated
AirTran as a low-fare competitor.